ExpertEasy2 marksMultiple Choice
ACCA · Question 16.1 · Working Capital Management
Section B - Case 1: Verdant Yields Co
Scenario: Verdant Yields Co is an organic avocado exporter. The business is highly seasonal. Annual credit sales are $18,250,000. The current trade receivables balance is $3,000,000. Assume a 365-day year.
Question 1: What is the current receivables collection period (in days)?
Section B - Case 1: Verdant Yields Co
Scenario: Verdant Yields Co is an organic avocado exporter. The business is highly seasonal. Annual credit sales are $18,250,000. The current trade receivables balance is $3,000,000. Assume a 365-day year.
Question 1: What is the current receivables collection period (in days)?
Answer options:
A.
45 days
B.
50 days
C.
60 days
D.
75 days
How to approach this question
Use the receivables days formula: (Trade Receivables / Annual Credit Sales) × 365.
Full Answer
C.60 days✓ Correct
Receivables collection period = (Trade Receivables / Annual Credit Sales) × 365
= ($3,000,000 / $18,250,000) × 365 = 60 days.
Common mistakes
Dividing sales by receivables instead of receivables by sales.
Practice the full ACCA FM — Financial Management Practice Exam 5
32 questions · hints · full answers · grading
More questions from this exam
Q01**Section A**
The Global Clean Water Initiative is a non-governmental organization (NGO) focused...EasyQ02**Section A**
NeuroTech Prosthetics, a high-growth medical technology startup, is seeking additi...MediumQ03**Section A**
AeroCater Services provides specialized inflight meals to commercial airlines. The...MediumQ04**Section A**
AgriNutrient Co requires 50,000 tonnes of raw phosphate annually for its fertilize...EasyQ05**Section A**
SolarGrid Municipal is evaluating a new solar farm project. At a discount rate of ...Medium